House Rent Allowance (HRA) Exemption Rules & Calculation#
What is HRA?#
House Rent Allowance (HRA) is a component of your salary that helps you meet your rental expenses. Part of HRA received from your employer is exempt from tax under Section 10(13A).
Who Can Claim HRA Exemption?#
You can claim HRA exemption if:
- You are a salaried employee receiving HRA from your employer
- You pay rent for a residential accommodation
- The accommodation is not owned by you or your spouse
Exemption Calculation#
The exempt HRA is the minimum of:
- Actual HRA received from employer
- 50% of basic salary (for metro cities) or 40% (for non-metros)
- Actual rent paid minus 10% of basic salary
Metro Cities#
For Delhi, Mumbai, Chennai, and Kolkata, the HRA exemption is:
- 50% of basic salary + DA
Non-Metro Cities#
For other cities:
- 40% of basic salary + DA
Example Calculation#
Suppose:
- Basic Salary: Rs 50,000 per month
- HRA Received: Rs 15,000 per month
- Rent Paid: Rs 18,000 per month
- City: Mumbai (Metro)
Calculation:#
| Component | Amount |
|---|---|
| Actual HRA | Rs 15,000 |
| 50% of Basic (Metro) | Rs 25,000 |
| Rent - 10% of Basic | Rs 18,000 - Rs 5,000 = Rs 13,000 |
Exempt HRA = Rs 13,000 (minimum of all three)
Taxable HRA = Rs 15,000 - Rs 13,000 = Rs 2,000
Documents Required#
Keep these documents ready:
- Rent receipts (if rent exceeds Rs 3,000 per month)
- Landlord's PAN (mandatory if rent exceeds Rs 1 lakh/year)
- Rent agreement (if available)
- Bank statements showing rent payments
Key Points to Remember#
- HRA exemption is available only for the period you actually pay rent
- If you own a house but live in a different city for job, you can still claim HRA
- You can claim HRA even if you live with parents (with rent agreement)
- Combine HRA with home loan interest for maximum tax savings — see our Section 24 home loan interest deduction guide for the rules, and use the Home Loan Prepayment Calculator to see how prepaying affects your future interest (and therefore your Section 24 deduction)
HRA vs Rent Paid to Landlord#
If you pay rent to your parents, ensure:
- They include rental income in their income tax return
- They have a valid rent agreement
- You make payments via bank transfer
How to Claim HRA#
- Submit rent documents to your employer
- Employer calculates exemption and deducts TDS accordingly
- If not claimed from employer, claim via ITR filing
Recent Updates#
- The 10% deduction for rent calculation is based on basic salary
- Both basic salary and DA are considered for calculation
- Salary for this purpose includes basic pay + DA + commission